Tuesday, September 11, 2012

Paper: Key global warming report was fudged

EDMONTON — Peter Lilley, MP in the British Parliament and a former cabinet minister under both Baroness Thatcher and Sir John Major, is an economist by training. He is not a climate skeptic — indeed, he has accepted the fourth assessment of the International Panel on Climate Change (IPCC) as "founded on science" and sound.

He is also an advocate of sound, evidence-based, public policy (as opposed to policy-based public policy) — something one might expect from a former chairman of the right-wing think-tank the Bow Group.

Why then is he so upset?

He is upset and highly critical of the way in which a certain kind of "voodoo economics" has been worked to develop public policy on climate change and is especially irked by the work of Baron Stern of Brentford, the IG Patel professor of economics and government, chair of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics, and 2010 professor of Collège de France. Lilley is not easily irked. What has caught his full ire is his analytic look-back at the Stern Review on the Economics of Climate Change — a 700-page report released for the British government in October 2006. You can see why in his report What is Wrong with Stern? The Failings of the Stern Review, available from the Global Warming Policy Foundation.

His basic concern is that Stern was, at the time, a government-employed economist who was asked by his government to answer a question which was formulated by government. He gave them the answer they were hoping for.

Put simply, Stern suggested that the benefits of radical action on reducing emissions would be around five times the costs. This is not what most economists were saying at the time and even fewer would say this now. Stern used some voodoo to bend the available data to fit the policy. In other words, policy-based evidence.

Lilley identifies six major failings in the Stern review.

Comparing a part with the whole. Looking at policies adopted to reduce man-made emissions rather than looking at total CO2 emissions coming from all sources. Stern also just looks at accumulated emissions since the industrial revolution, but ignores known evidence of the ability of the earth to absorb emissions.

Lilley suggests that this has a major impact on Stern’s conclusions — he is not dealing with the true state of emissions.

Describing future centuries as "now." Stern suggests that global warming will cut GDP by five per cent "now and forever." Yet his own analysis shows that the economic losses due to responding to emissions with the kind of measures he envisaged were below the costs of mitigation, at least in this century.

Inconsistent cost of discounting of costs and benefits. Stern doesn’t reveal the rates of discount he uses for his calculations in the report itself, but several studies have done so since. He effectively uses the normal market rates to discount the costs of decarbonizing the economy. Lilley suggests that doing so understates the costs of the policies for emissions management by around 2.5 to five times. It is a sleight of hand.

Cherry Picking Unreliable Studies. Throughout, Stern cites just those studies that suit his argument (policy-based evidence) rather than the range of studies which should inform this case. To give just one example, his evidence on damage to property due to increased storms "caused" by climate change is around 100 times too large if you accept the premise that climate change causes such storms, something the IPCC itself is not convinced of.

Ignoring adaptation. Industry and communities are very adaptable. Stern ignores this unless it suits his argument. Lilley gives a specific example — Stern cites the case of a crop that, at 4C will produce significantly lower yields (around 70 per cent lower). Yet farmers have the option of switching to a similar crop (different varietal) where yields would rise dramatically under these conditions, a fact Stern chooses not to share in his report.

Strange ethics. Several studies have shown that, even if we do nothing, people will be richer by 2020 than they are today. Yet Stern is of the view that "global warming threats humanity with extinction or immiseration" - something highly implausible by all analysis of the impact of the current small amount of warming, according to Lilley. Stern suggests anyone who opposes his view of the needed course of action is being "unethical" and threatening future generations. Lilley suggests that this is, basically, bullshit.

Stern was very influential throughout the world, but most especially in Europe. He suggested a crash program of action to curb emissions in the name of saving humanity. But humanity, at least according to science, is not under threat and we are dealing with natural variations and some modest but marginal human impacts, according to Lilley.

But using voodoo economics and policy-based evidence, the economies of the world that adopted the Stern approach have lowered their growth and made energy costs so high that many jobs have been exported to other jurisdictions, thereby increasing climate change risk rather than lowering it. The policies suggested by Stern are unaffordable and are not producing the benefits that Stern said they would.

Lilley is upset with Stern and with the governments who blindly followed his advice. What he now suggests is a more moderate approach to emissions reduction, placing greater emphasis on innovation activities which may speed adaptation and a recognition that developing nations need to increase their energy supplies in the most efficient and effective ways possible.

Lilley’s analysis is thorough and comprehensive as well as well researched and informed. He is not a climate change skeptic, but a realist and a devotee of evidence-based policies. His critique is worth a read.